China v America

The West cannot fundamentally change China or ignore it. But by acting together, it can find a way to do business with an authoritarian state it mistrusts.

Perhaps a dozen countries might end up banning Huawei—Germany is sitting on the fence (see article). But it will still be used in much of the emerging world, hastening the splintering of the tech industry. Trade relies on common rules but Britain’s decision has been made amid a swirl of lobbying and threats. It is hard to elicit a principle behind it that can be usefully applied more broadly. If the problem is gear made in China, then Ericsson and Nokia do that, too. If it is Chinese firms building systems which connect devices (in the case of 5G, robots and machines), then a similar logic could be applied across a digitising world economy. German cars and Apple phones sold in China are packed with software, data and sensors. Is China entitled to ban them, too?

This feeds a spiralling sense of lawlessness. The average tariff on Sino-American trade is 20%. Direct investment flows from China to Europe have dropped by 69% from the peak in 2016, according to Rhodium, a research firm. Other firms are caught in the crossfire. TikTok faces a ban in India and, perhaps, America. China plans to impose sanctions on Lockheed Martin for selling arms to Taiwan. Now that President Donald Trump has ended Hong Kong’s special status, HSBC, a bank with huge interests there, could be subject to punishment by both China and America. Some Chinese lenders may be banned from dealing in dollars.

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